JPMorgan Turns in Record Profit, Higher Revenue

CHRISTINA REXRODE | AP Business Writer

NEW YORK (AP) – JPMorgan Chase, the country's biggest bank, reported a record quarterly profit Friday, helped by a surge in mortgage refinancing. CEO Jamie Dimon said he believed the housing market "has turned a corner."

The bank made $5.3 billion from July through September, up 36 percent from the same period a year ago. It worked out to $1.40 per share, blowing away the $1.21 predicted by analysts polled by FactSet, a provider of financial data.

Revenue rose 6 percent to $25.9 billion, beating expectations of $24.4 billion. Earnings were also helped because the bank set aside less money for bad loans – $1.8 billion, down 26 percent from a year ago.

Revenue from mortgage loans shot up 29 percent. About three-quarters of that was from people refinancing, rather than buying new homes. Low interest rates and government help encouraged homeowners to refinance.

A Federal Reserve survey earlier this week found that a stronger housing market helped economic growth in almost every part of the country. Home sales are up, prices are rising more consistently in most places, and builders are more confident.

Dimon noted that the bank was still seeing a high level of souring mortgage loans, and said he expects high default-related expenses "for a while longer." And he noted homeowners are still struggling under mortgages they can't afford, saying the bank was working to modify those loans.

The bank gave few details on the surprise $6 billion trading loss that dominated its previous earnings report. It did mention that a credit portfolio moved to the investment bank from the chief investment office, which was responsible for the bad trade, "experienced a modest loss."

The bank set aside an extra $684 million for legal expenses. Chief financial officer Doug Braunstein said the reserves were related to "a variety of issues," and not just a lawsuit filed last week by the New York attorney general over mortgage-backed securities sold by Bear Stearns. JPMorgan bought Bear Stearns as it veered toward collapse in 2008.

Dimon said he couldn't predict how much the bank would have to spend in the future.

"Obviously we're in a litigious society," he said on a call with reporters. "We have a lot of mortgage suits coming and others. ... Hopefully it will come down over time but we can't promise you that."

The number of employees was up about 1 percent over the year. But it fell about 1 percent compared with the previous quarter. The bank shed about 3,300 jobs to 259,550.

Dimon said he believed the number of workers would continue to come down, partly because the bank will need fewer people to handle problem mortgages but also because the company would continue to look for efficiencies.

He declined to give specifics on how bonus season might play out early next year. "The company's doing quite well, and we want to pay our people fairly and properly as we always have," he said.

Dimon also declined to answer a question about what the board of directors might decide about his own pay. Some had speculated it would be cut because of the trading scandal.

"I would never tell you what our board of directors does, OK?" Dimon said. He was paid $23 million last year, mostly in stock awards.

JPMorgan's investment banking unit earned more in fees for underwriting stock offerings and debt offerings, which could signal that wary companies and investors are more willing to get back into the market.

The bank's revenue was slightly lower, $25.1 billion, when adjusted for a controversial accounting rule that penalizes banks when the bonds they issue to investors look safer and rise in value.

The theory behind the rule, in place since 2007, is that it would cost banks more to buy those bonds back from investors. The rule has been sharply criticized by the banking industry, including by Dimon, and could be phased out as early as next year.

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